Executive Summary & SWOT Analysis of Robert Mondavi and Wine Industry

By

Bilal Quadri

Brad Ufkes

Katie Leeb

Shane Miller

Saswat Tripathy

George Brown College

HOST – 4113 International Culinary Strategies

Professor James Smith

Thursday, March 31, 2011

 Executive Summary

Since 1966 Robert Mondavi has been creating innovative wines and today is one of the world’s finest
brands valued at $600 million. Due to the recent economic downturn, Mondavi and general wine sales
have slowed forcing the global wine industry to consolidate. Industry consolidations began to occur to
New World producers by premium wineries purchasing or merging with rivals, jug wine producers’
acquiring premium wineries in order to keep pace with changing consumer tastes, and lastly alcoholic
beverage firms diversifying into the premium wine market. Despite these types of consolidations Mondavi
remained an independent company relying on the U.S. market for sales. While competitors spent money
pursuing acquisition strategies, Mondavi chose to focus on the organic growth of its popular premier
brands.

Today the global wine industry reports retail sales ranging from $130 to $180 billion in the
classifications of: jug or commodity, popular premium, super premium, ultra, and luxury wines. In the
United States, jug wine sales had declined approximately 3% per year over the last 10 years, while
premium wines increased 8% to10% annually. A shift toward high quality premium wines is occurring in
many wine producing countries such as the United Kingdom, while Europe still consumed a great deal of
table wine. Currently 4 firms account for 75% of wine sales in Australia, while 20 firms controlled 75% of
the U.S. wine industry, and the European market remained highly spread apart by region.

New World wine producers invested heavily in technology to create a consistency of quality in
their wines and to reduce operating costs. After developing a recognizable name, wine producers extended
the brand to an entire line of products, each specific to a different market segment. In terms of distribution
Mondavi sells its wines through more than 100 independent beverage distributors in the U.S., and also
employees nearly 200 sales representatives to market the company’s brands to independent distributors
and large retail outlets. They provide key information on marketing and promotional campaigns, and
gather feedback from the wholesale market.

The main problem that Mondavi was experiencing involved the sales force not being able to
market Mondavi’s complete product line effectively because the time needed for educating retailers about
Mondavi’s ultra-premium and luxury wines was too little. Typically the sales team would focus on
promotions, competitive pricing, demand forecasting, and shelf management for popular products. Rather
than marketing to the channel, Mondavi may be more successful by hiring a third party experiential
marketing organization to communicate directly with consumers. By having representatives create
individual customer experiences; Mondavi will likely move much more product and by pass educating
retailers who are bombarded with information from many different brands. Customers would remember
Mondavi representatives and have a long term connection with the brand. Also Mondavi would not have
to rely on the retailers influence over the consumers.

Potential solutions for dealing with distributors would to be scale back from the 100 current
distributors to a more manageable number of important distributors. Currently the company’s largest
wholesaler Southern Wine and Spirits, accounts for 29% of the firm’s sales, while 15 distributors
represent approximately two-thirds of Mondavi’s sales. Limiting distributors will reduce costs and offer
expansion for successful distributors to take over regions of under performing competitors. By offering
sales incentives, distributors will also be motivated to sell Mondavi products over the other products they
are responsible for. Lastly having distributors educate retailers on brand information was not successful
because of time constraints. Rather than teaching brand knowledge to staff, Mondavi should reallocate
money for signage to marketing directly to the consumer through television, billboards and the internet.
Retailer’s education should be reduced to printed material sent to every store to be reviewed at their
discretion.
 SWOT Analysis

Strengths Weakness

 Mondavi chose to focus on the organic
growth of its popular premier brands.
 In terms of distribution Mondavi sells its
wines through more than 100 independent
beverage distributors in the U.S.
 Relied on the U.S. market for sales.
 Letting distributors educate retailers on
brand information was not successful
because of time constraints.

 Nearly 200 sales representatives market the

company’s brands to independent
distributors and large retail outlets.

 They provide key information on marketing

and promotional campaigns, and gather
feedback from the wholesale market.

Opportunities Threats

 Rather than marketing to the channel,  Due to the recent economic downturn,
Mondavi may be more successful by hiring a Mondavi and general wine sales have slowed
third party experiential marketing forcing the global wine industry to
organization to communicate directly with consolidate.
consumers.
 Industry consolidations began to occur to
 Limiting distributors will reduce costs and New World producers by premium wineries
offer expansion for successful distributors to purchasing or merging with rivals, jug wine
take over regions of under performing producers’ acquiring premium wineries in
competitors. This will further maximize the order to keep pace with changing consumer
profit. tastes, and lastly alcoholic beverage firms
diversifying into the premium wine market.
 Rather than teaching brand knowledge to
staff, Mondavi should reallocate money for
signage to marketing directly to the
consumer through television, billboards and
the internet. Retailer’s education should be
reduced to printed material sent to every
store to be reviewed at their discretion.